India has shifted to BS6 emission norms and dealerships with unsold BS4 units cannot register them as new
Amid the ongoing COVID-19 crisis, India’s automotive industry has shifted to the stringent BS6 emission norms. The pandemic hit the country at the same time when dealerships were working hard to clear off unsold BS4 stock ahead of the initially-proposed deadline, April 1. As showrooms remained closed as part of the nationwide lockdown protocol, FADA (Federation of Automotive Dealers Associations) had approached the Supreme Court to seek a convenient relaxation to the deadline.
However, the apex country extended the deadline only by 10 days post the second stage of lockdown on a conditional basis. Under this, dealerships were allowed to sell only 10% of their BS4 stock. On several occasions in the past couple of months, concerned authorities have neglected the auto industry even though OEMs supported the government in the fight against COVID-19, through donations and equipment supply.
India’s largest car manufacturer, Maruti Suzuki was one of the first to start shifting to BS6. Though the company had stopped producing BS4 cars months ago, they still registered a loss of Rs 125 crore. Maruti’s CFO, Ajay Seth revealed that the company has written off this loss of BS4 inventory post the March 2020 quarter results were announced. The amount accounts for BS4 car parts lying with dealers as well as the company.
Maruti Suzuki was one of the first brands in the country to commence a rapid transition to BS6 emission norms. In the process, Maruti Suzuki India Limited (MSIL) has ditched all its diesel powertrains for a petrol-only portfolio. For instance, the previous diesel-only Vitara Brezza subcompact crossover comes only in a 1.5 petrol avatar now.
Since April 2019, Maruti Suzuki has sold over 8 lakh BS6 units. Prior to the lockdown, dealerships were offering compelling discounts for BS4 models in comparison to BS6 counterparts. While BS6 update for most cars came alongside a facelift or mild-life refresh, certain products proved to be arguably better in their phased-out BS4 format.
As per guidelines, car dealerships of all OEMs, with unsold BS4 stock (regardless of vehicle category) had three options: (1) register and sell them as used products, (2) consult parent OEM for a buyback policy or (3) send the units for scrappage following recommended guidelines. Out of these, option (2) seemed the most feasible as manufacturers could consider the products as a development or test platform. Of course, it would be efficient enough to diminish losses.
Apart from Maruti Suzuki, several automakers operating in the country are expected to share their losses on BS4 units. With online sales platforms becoming part of the ‘new normals’, the Indian automotive industry is heading to a new direction — read more details.